Sharon Assails Critics, Defends Loan

Megan K. StackTimes Staff Writer

As a swelling financial scandal gathered around his family and threatened to cost his party upcoming Israeli elections, a furious Prime Minister Ariel Sharon appeared on live television Thursday night to upbraid his "wanton, irresponsible" critics and insist upon his innocence.

This week, an Israeli newspaper reported that Sharon and his two sons are being investigated for fraud, breach of trust and collecting bribes. According to the report in Haaretz, the prime minister's sons accepted a transfer of $1.5 million from an old army friend of Sharon in South Africa.

The revelation rattled voter confidence and transformed a lackadaisical campaign into a bitter battle for public trust. Polls showed that Sharon's ruling Likud Party, heretofore regarded as unsinkable, had lost one-quarter of the parliamentary seats it had been projected to win in the Jan. 28 elections.

"I think this is quite damaging," said Zeev Segal, a law professor at Tel Aviv University. "It looks like the downfall of the Sharon empire."

Although Sharon's opponent in the upcoming elections and, privately, some Likud members have called for the prime minister to step down, the retired army general showed no signs of backing down Thursday.

In fact, 20 minutes into Sharon's televised speech, election officials decided that the counteroffensive was so political it broke Israel's campaign propaganda laws, and the nation's television stations were ordered to yank Sharon off the air. The prime minister was silenced before he finished explaining the South African loan.

If Sharon is reelected -- and polls indicate that's still the most likely outcome -- that won't be the end of his worries.

The investigation into the loan won't be completed until after the election. Moreover, analysts say the scandal could put Sharon in a precarious position when it comes to creating a coalition in Israel's parliament.

Until this week, the idea that the opposition Labor Party could pose a serious threat to Likud was politically unthinkable. In early December, Likud was expected to claim 41 of the 120 seats, and Sharon was poised to coast into reelection on a popular record of responding to the Palestinian uprising with tough military crackdowns.

But as the campaign got underway, allegations of vote-buying in the Likud primaries trickled into the news, and voters drifted away. By the time the news of the Sharon family imbroglio had sunk in, Likud was picking up only between 27 and 30 seats in various polls.

Left-center Labor, led by Amram Mitzna, has drawn between 22 and 24 seats at the polls since the primaries. Pollsters say the party hasn't gained any of Likud's lost votes, because voters rarely swing from right to left.

Sharon spent Thursday sitting home at his ranch, listening to media accounts of his entanglement, Israeli radio reported. After sunset, he marched into his Jerusalem office, faced a bank of cameras and unleashed the televised tongue-lashing on Labor, Mitzna and the press.

"Labor can only see elections. They think the world revolves around them and their slim chances of returning to power," he said. "They tried to blacken an entire movement.... I ask you: Have you gone crazy? Have you lost your minds?"

When election officials pulled the plug on Sharon's broadcast, Likud leaders complained that the prime minister was deprived of his opportunity to defend himself. Labor, meanwhile, immediately demanded that election officials shave 20 minutes from Likud's campaign air time to make up for the speech.

The newest scandal centers on the loan from British businessman Cyril Kern, who lives in South Africa. A detailed letter from Israeli investigators to the South African government says that when the Israeli state comptroller asked Sharon where the money came from, he replied that he'd mortgaged his ranch, the Haaretz newspaper reported.

If it turns out that the prime minister accepted money or benefits without notifying the state comptroller, it would have been a breach of confidence under Israeli law, Segal said.

Aides to the prime minister had said Sharon would present documents to clear his name. But Thursday night, the prime minister announced that all the relevant evidence had already come to light.

He also said he had no idea his sons had taken a loan from Kern, a lifelong friend.

"I say clearly: I did not know how the rest of the sum was raised," Sharon said. "We had spoken about putting up the ranch as collateral, and to the best of my knowledge this is indeed what had been done."

The family needed the money in 2001 because it was already in a scrape over campaign finance. Sharon had to come up with funds to repay campaign money he'd illegally pushed through shell companies. The family had to take out a loan. To give the family collateral, Kern deposited money into a joint account held by the Sharon brothers.

"I know that everything is kosher and legal," the prime minister said Thursday.

In public, Likud officials have echoed Sharon's dismay. They have accused leftists and journalists of digging up dirt to tilt the elections and insisted that voters will drift back into the fold. Amid complaints of political machinations, Atty. Gen. Elyakim Rubinstein launched an investigation to ferret out the source of the leak to Haaretz.

"Without doubt, all the reports -- some of which were based on fact and some of which blew things out of proportion -- caused a certain erosion," parliament member Yisrael Katz of Likud told Israeli radio. "But I estimate most of those votes are now on standby."

Privately, however, Likud members complained of sinking morale. Sharon skipped a Wednesday night party meeting in which strategists planned massive weekend street campaigns in hopes of winning back some of the lost votes.

And in the next morning's editions, Maariv newspaper quoted unnamed Likud officials grumbling that the Sharon family is pulling the party down.

Two parties -- the ultra-Orthodox Shas and the centrist Shinui -- appear to be attracting Likud's disenchanted voters. Shas ministers would be expected to work with the right-wing Sharon, but lawmakers from the Shinui wouldn't necessarily cooperate with Likud.

"He's a thick guy with a thick skin, but this could hurt him," said David Newman, a political scientist at Ben-Gurion University.